Friday, November 06, 2009
Editorial: Stimulating to excess
At great expense, Congress sweetens the deal for homebuyers.
From the RoundTable blog
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If a family can afford an $800,000 home, could the lack of a $6,500 tax credit really be a deal breaker? Congress must think so as it prepares to spend $10 billion by April to entice not just first-time homebuyers to purchase a house but also existing homeowners to trade up.
Granted, the real estate market is still sluggish and could use a little more stimulating. But is it wise for the government to encourage Americans to buy more expensive homes? Isn't that part of what got the nation into this fix?
The homebuyer tax credit is tucked into a bill that extends unemployment benefits. By attaching it this way, Congress can duck criticism that it is authorizing another expensive stimulus package -- even though it is.
The provision extends the deadline from Nov. 30 to April 30 for first-time homebuyers to receive an $8,000 credit.
The initial credit apparently has helped spur a rebound in the real estate market. According to Bloomberg.com, Goldman Sachs Group Inc. said the existing credit probably spurred 200,000 home sales that otherwise wouldn't have occurred.
If so, an extension for first-time homebuyers might prove helpful in spurring housing sales.
But offering a $6,5000 credit to people who have owned their home for at least five years will work at cross purposes.
For each house they purchase, another will be listed for sale, doing little to lessen the glut of inventory that contributes to depressed prices -- which was the purpose of the initial credits.
Congress also increased the income limitations from $75,000 to $125,000 for individuals and from $150,000 to $225,000 for couples.
The bill received wide support, passing the Senate on a 98-0 vote and the House 403-12. President Obama will not waste any time signing the measure.
No wonder taxpayers' mood continues to sour.
